Stetson v. Investors Oil, Inc.
| Decision Date | 22 April 1970 |
| Docket Number | No. 8602,8602 |
| Citation | 176 N.W.2d 643 |
| Parties | D. E. STETSON, as Trustee in Bankruptcy of the Estate of Willard Odegaard, Bankrupt, Plaintiff and Respondent, v. INVESTORS OIL, INC., and Anchor Casualty Company, Defendants and Respondents, and Pan American Petroleum Corporation, Garnishee and Respondent. Roy H. PETERSON and Warde F. Wheaton, Plaintiffs and Appellants, v. LeRoy LUTZ, Sheriff of Williams County, and D. E. Stetson, as Trustee in Bankruptcy of the Estate of Willard Odegaard, Bankrupt, and Investors Oil, Inc., a foreign corporation, and William D. Walters, Defendants and Respondents, and Northwestern National Bank of Minneapolis, et al., Defendants and Appellants, and Pan American Petroleum Corporation, Intervening Defendant and Respondent. Civ. |
| Court | North Dakota Supreme Court |
Syllabus by the Court
1. For the reasons stated in the opinion, we conclude that privity existed between the judgment debtor and the owners of participating units in the leasehold held in the name of the judgment debtor as of the date of judgment and that accordingly the interests of the participating units in the leasehold are subject to the judgment obtained against the judgment debtor.
2. A judgment recovered in an action is res judicata as to the issues adjudicated therein in favor of or against a person who, through not an actual party to the record in that action, prosecuted the action or the defense thereto, on behalf of a party, or assisted the latter or participated with him in the prosecution of such action or its defense, if the same issue should be raised again in a subsequent action between him and the adversary of the party to whom his assistance was given or with whom he cooperated.
3. For the reasons stated in the opinion, a motion made for attorney fees in this court on behalf of the garnishee in Civil No. 9785 and the intervening defendant in Civil No. 10791 in Williams County is denied.
Rolfstad, Winkjer & Suess, Williston, for the appellants Roy H. Peterson, and others.
Vogel, Bair & Graff, Mandan, for respondents LeRoy Lutz, Sheriff of Williams County, D. E. Stetson, as Trustee in Bankruptcy, and Anchor Casualty Co.
McIntee, Whisenand & Calton, Williston, for respondent William D. Walters.
Pearce, Engebretson, Anderson & Schmidt, Bismarck, for respondent Investors Oil, Inc.
Bjella & Jestrab, Williston, for respondent Pan American Petroleum Corp.
In 1960 Willard Odegaard commenced an action against Investors Oil, Inc., known as Civil No. 9785 in the District Court of Williams County. Investors Oil had drilled an oil well within the area encompassed by the Garrison Reservoir. At about the time that the oil well was completed the water in the reservoir began to rise and would have covered the wellhead unless something was done to protect it. Under the terms of the contract entered into between Mr. Odegaard and Investors Oil, Mr. Odegaard was to construct a mound directly over the wellhead so that it would be protected from the rising water. The action initiated by Mr. Odegaard was to recover payment for the construction of the mound, and although he obtained a verdict of $97,338.97 upon which judgment was subsequently entered, this court on appeal by decision rendered August 17, 1962, reversed the judgment and granted a new trial. Odegaard v. Investors Oil, Inc., 118 N.W.2d 362 (N.D.1962).
On retrial or thereafter, D. E. Stetson, as trustee in bankruptcy of the estate of Willard Odegaard, was substituted as party plaintiff. This time the jury returned a verdict in favor of the plaintiff and against Investors Oil for $52,933.57. On appeal from the judgment entered on that verdict, this court affirmed the judgment on February 11, 1966. The amount of the judgment on remittitur was $68,521.94. Stetson v. Investors Oil, Inc., 140 N.W.2d 349 (N.D.1966). A supersedeas bond on appeal in the amount of $40,000 was paid and there is now a balance due on the judgment of $28,521.94.
In November of 1966 a garnishment in aid of execution was initiated in Civil No. 9785 to attempt collection of the balance due on the judgment from oil runs from the well over which Mr. Odegaard had constructed the mound. This brought Pan American Petroleum Corporation into Civil No. 9785 as garnishee. In a further effort to collect the judgment, an execution sale of the leasehold interest was scheduled by Mr. LeRoy Lutz, the sheriff of Williams County.
To prevent the oil runs from being garnished and the leasehold interests from being sold by the sheriff on execution sale, Roy H. Peterson and Warde F. Wheaton initiated a quiet title action in December of 1966, known as Civil No. 10791, in the District Court of Williams County. At the time that this action was commenced the court issued a restraining order preventing the garnishment and execution sale in Civil No. 9785 until the entire matter could be decided. The proceedings in Civil No. 9785 and the quiet title action in Civil No. 10791 were consolidated for trial and tried to the court in October of 1968. By judgment dated the 17th of January, 1969, the district court held that the leasehold interests of the plaintiffs, as well as all of the appellants in Civil No. 10791, were subject to the judgment in Civil No. 9785. In accordance therewith the court required the garnishee to pay to the sheriff of Williams County on behalf of the trustee in bankruptcy the net proceeds from the oil and gas purchased by the garnishee, Pan American Petroleum Corporation, attributable to the leasehold estates of the owners of participating units (subject to a certain royalty exception not pertinent here), in a sum not to exceed an amount sufficient to satisfy the judgment. In the event that that sum was not sufficient to satisfy the judgment the sheriff was further authorized to proceed with additional garnishments in aid of execution, execution sale, and such other remedies as were provided by law. It is from this part of the judgment that appeal is taken.
Who are the appellants and what do they contend in this lawsuit? To answer that question some general background information is essential.
Investors Oil, Inc., is a Minnesota corporation formed for the purpose of engaging in oil and gas exploratory drilling and is owned by Mr. Robert E. Hanson and Mr. William D. Walters and their respective wives. Incorporated in 1956, Investors Oil ultimately proposed a plan which became known as McGregor Field, Program IIIA, to drill oil and gas wells in Williams County, North Dakota. Thirty-six participating units in the program were sold as securities in the state of Minnesota to approximately twenty-five different owners, who are the appellants or their predecessors in interest in this appeal. These interests were not disclosed to Mr. Odegaard at the time he entered into the contract with Investors Oil to construct the mound.
It should be noted that during the first trial of Civil No. 9785 a counterclaim was filed by Investors Oil making a claim against Mr. Odegaard's bond and interpleading Mr. Odegaard's bonding company for Mr. Odegaard's alleged failure to substantially complete the mound. In the first trial of Civil No. 9785, as well as in the second, the counterclaim of Investors Oil was dismissed by the jury.
The appellants place great significance upon the fact that during the course of the first trial, Mr. Walters and Mr. Hanson both testified that approximately twenty-five people had purchased a total of thirty-six units in the program and that Investors Oil acted as a mere nominee of the owners of the units. It is important to note, however, that Investors Oil was the original owner of record of the leasehold interests and that it remained the only record owner of the leasehold interests from the time the leasehold interests were obtained until quitclaim assignments were made to the participating owners on February 21, 1966, ten days after our court affirmed the judgment in the second appeal in Civil No. 9785.
The appellants, or in some instances their predecessors in interest, as owners of undivided working interests in the oil and gas lease pertinent to this litigation, entered into agreements with Investors Oil on January 1, 1959. Under those agreements, Investors Oil was designated the first party, and the owners of the undivided working interests were designated the second party.
The pertinent parts of the agreement follow:
I.
Term. The term of this contract shall continue until terminated under the provisions of Article XI.
II.
Duties of the First Party. First party shall, using the prudence and diligence of a reasonable man in the care of his own affairs, maintain or cause to be maintained adequate records and accounts of all operations and expenditures made in connection with the subject leaseholds, and it will furnish to second party all information required to properly file Federal income tax returns.
First party will from time to time inspect each property on which operations are being conducted, observe the performance of the operator, and consult with him and make such recommendations as first party deems appropriate in second party's best interests.
III.
Expenditure of Second Party's Fund. First party may from time to time assess second party for his prorata share of the working fund to operate the above described leaseholds. These funds, payable within seven (7) days after assessment, may be expended to pay second party's prorata share of the following costs incurred in connection with the leaseholds, to-wit: (1) geological, geophysical or other scientific services, (2) tests, (3) reworking and repairing productive wells, (4) plugging depleted wells, (5) any and all other expenses incurred by first party in connection with services to be rendered by first party pursuant to this agreement, and (6) fees payable to first party pursuant to this agreement.
IV.
Power of Attorney. Second party hereby appoints first party...
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